This type of arrangement works in a rent situation. Either the buyer or the renter has the option to purchase a home that he/she is renting or renting out. However, in order for either party to make a move, they both have to come to a general agreement. A right of refusal is when the buyer has the option to purchase the home first before the seller puts the house on the market.
Mostly, whatever the renter pays is put as a down payment on the purchase of the home. If the renter decides not to buy the home, then the money is forfeited.
If the renter decides that he/she wants to purchase the home, then he/she must qualify for a home mortgage loan with a home mortgage loan company or lender (provided that the contract between the buyer and the seller says so). The extra money paid by the seller (the option money), is not applied toward the down payment, in this scenario. But, it can be applied toward the house costs.
If the money is put toward the down payment, then the contract between the buyer and seller must be within the guidelines of approving home mortgage loan company or lender.